During the recent great recession since 2007, many observers wrote the American Manufacturing Obituary, claiming that American could no longer be regarded to be a world leader because of intense competition from low-cost competitors [11]. Trade liberalization has increased the economic interdependence among nations. Multi-National Corporations (MNCs) in US have established operations in developing counties where labor is cheaper. One consequence of this increased Globalization of manufacturing industry has been movement of jobs and production from U.S. to Low Labor Cost (LLC) countries (which are often less developed countries) for higher corporate profits. This practice is called Offshoring, and is a direct consequence of Monopoly Capitalism, where the prime motive is corporate profits without consideration of job losses for people in the home regions. Globalization works to the detriment of American workers and reinforces unfair labor competition because of lower wages and inadequate working conditions existing in developing nations [10].

The term ‘Offshoring’ is used interchangeably with the term ‘Outsourcing’, but there is a fundamental difference between these two terms:

- Outsourcing refers to movement of jobs and tasks from within a firm to supplier firms, without regard to their location [12].- Offshoring refers to movement of entire operation of a companies (and jobs and tasks) from one country to another [12].

Semiconductor investment is often considered to be an investment in “enabling technology”, which leads to advances in new technological consumer products like computers, cell phones, motor vehicles, etc. which improve the quality of life of human beings often at faster speed of operation and with lower costs [10]. The semiconductor industry includes academic research on semiconductors and related industries like computers, communications and software. Using total factory productivity as a measure of innovation, over the period from 1960 to 2007, innovation in the Semiconductor industry grew close to 9% per year, 25 times the innovation growth rate for the economy as a whole, and accounted for close to 30% of aggregate economic innovation [10]. By sector, semiconductor deepening accounted for 37% of the growth in labor productivity in the Communications Equipment industry, 25% of the growth of the Other Electronic Products industry, 14% of Educational Services, and 9% of labor productivity growth in the Computer and Peripheral Equipment industry for period 1960-2007 [15]. In the post World War II era, US was a role model to the world. The scientific and technological developments that occurred in US post-world war II paved an economy which the world tried to emulate.

The invention of the Integrated Circuit by Jack Kilby from Texas Instruments Inc. and Robert Noyce from Fairchild Semiconductors Inc. made it possible for human beings to send man onto the moon. The US economy in 1950s-60s elevated the standard of living of overall America, by strengthening its middle class with high paying jobs. That era was considered to be the golden era of America. With new technological innovations in semiconductors and related fields, US became the first country to send the man onto moon. Being at the fore-front of technological innovations, U.S. was a powerhouse of creating high paying manufacturing jobs and service jobs.

The globalization of economy started with the intention to supposedly capture foreign markets, but has oddly resulted in the loss of high paying manufacturing jobs from the US to LLCs due to the highly competitive nature of U.S. versus offshore competition in semiconductor technology manufacturing. The present state of US economy has been very discouraging to the millions of Americans who are unemployed. This jobs crisis is a result of diminished purchasing capacity of consumers due to crony Macro-economic policies. With decreased exports and increased imports and the high cost of maintaining US war fronts abroad, there has been increasing budget deficit over the years, causing serious concerns and political tensions.

This political impasse and the current debate regarding achieving a balanced budget with spending cuts and tax increases has prompted us to come up with this article. In this article, we focus on electronics and semiconductor industry, its moving offshore and causing loss of jobs and R & D in it, and offer some insights into:

- The causes of the loss of global dominance of US Electronics and Semiconductor industry over years;- How to fix this problem, that can contribute towards rejuvenating our economic growth; - How to revive the employment market associated with this industry.

II. Loss of Global dominance of US Electronics and Semiconductor Industry over years

A 2006 study from the Government Accountability Office (GAO) summarized the offshoring trend in semiconductor industry as follows: “The U.S. semiconductor industry began offshoring labor-intensive manufacturing operations in the 1960s, followed in the 1970s and 1980s by increased offshoring of complex operations, including Wafer fabrication and some research and development (R&D) and design work[16].. Semiconductor Assembly and Testing was the first to move to Asia, followed by fabrication and, more recently, by some design operations” [16]. The GAO found out that the “U.S. semiconductor industry has foreign operations in several locations, notably in Taiwan and China.” This is largely because of the government policies in those Low Labor Cost (LLC) countries like Taiwan, China, etc., which “created favorable investment conditions for U.S. semiconductor firms” [16].

The US share of world wafer fabrication capacity fell from 26% in 1994 to just over 20% in 2004[10]. This decline in the manufacturing sector is expected to continue, based on trends in 300 mm manufacturing. According to the Semiconductor Industry Association (SIA), approximately 80% of all new 300 mm semiconductor manufacturing is outside the United States, mostly in Asia (33% in Taiwan, 11% in Japan, 9% in Southeast Asia, 8% in South Korea and 5% in China) and 14% in Europe[10]. Analysts at Goldman Sachs in 2003 estimated that offshore relocations by US MNCs had resulted in transfer of high paying 100,000 manufacturing jobs per year, and this figure does not include the shift in manufacturing to foreign third-party contractors [3]. This paradigm of sending jobs offshore in very capital-intensive semiconductor manufacturing business is happening in spite of labor being insignificant part of total operating costs for a semiconductor wafer Foundry.

The “Y2K concerns” led to the offshoring of relatively high skilled, high wage information technology jobs related to semiconductor industry, such as programming and software development, with India as the prime beneficiary [10]. Of course, credit goes to India for producing talented software programmers who were readily available to perform these offshored jobs of good quality but at much lower wages compared to their American counterparts.

Although there are no publicly or privately funded national surveys that systematically collect information on the number of jobs that are moved offshore, the reports of offshore outsourcing by media are incomplete, since many firms avoid disclosing reasons for closure or transfer of specific operations [10]. A small and incremental offshoring by MNCs may go un-noticed by the media. Additionally, expansion of business operations overseas (rather than domestically) by MNCs in U.S. is frequently overlooked by the media even though that involves unemployment of existing workers[10]. According to the U.S. Bureau of Labor Statistics, the great productivity increases that have taken place in manufacturing sector further complicates our ability to fully understand the contribution of offshoring to job losses[10]. The technological advancements in development of advanced methods of production, information and communication technologies have made it possible to manufacture the same amount of goods and to provide services to the customers but with a fewer number of workers.

When studies were done in past regarding the trends of jobs being offshored from the US, it was concluded that jobs with lower skill set and lower wages were more at risk of being outsourced offshore. The studies also suggested that jobs that commanded higher salaries and required better skill sets were relatively immune from being offshored as they needed an advanced education. According to the findings of Alan Blinder, there was no relation between occupation’s skill level or educational requirement and its potential risk to be outsourced offshore. Blinder estimates that 42 to 56 million U.S. jobs are at risk of being outsourced offshored over next two decades [4].

III. Background of Offshoring

Since the end of World War II, trade agreements, such as General Agreement on Tariffs and Trade (GATT) and later World Trade Organization (WTO), have promoted “Free Trade” by lowering and abolishing trade barriers between member countries, including the United States[10]. In the Post World War II period, America was the sole survivor from war devastations as compared with countries in Europe and Asia. Hence, US companies had virtually no international competition when it came to high tech manufacturing, except to competition from Soviet Union. Free Trade then was very beneficial for US corporations, as all manufactured goods from US were able to compete freely around the world, as there was no import duty placed on these goods as a result of “Free Trade” agreements.

Over the years, the countries devasted during World War II regained their footing, and their economies started to revive and grow. During the 1960s, semiconductor manufacturing jobs were the first wave of the jobs to be outsourced to countries like Japan in the bid to reduce production costs and increase efficiency [10]. During the 1960s, since the tax structure of America was a progressive tax structure, the tax rates on wealthy were very high. It was under a republican President Eisenhower that the top 1% of America paid a highest tax rate of 92%. As a result of high taxes on the wealthy, the sales tax, payroll tax, social security taxes were very low. These taxes fall on the middle class Americans. Hence, the consumer purchasing capacity of the middle class was high, and consequently the economy was strong.

As a result of high consumer purchasing capacity, the domestic demand for American manufactured semiconductor goods and services was high. Therefore, the year over year growth in GDP was high, and offshoring semiconductor manufacturing to Asia did not quite hurt the domestic economy in the U.S. However, the Global competition and aggressive export-driven growth policies adopted by other countries have had a negative impact on the U.S. semiconductor industry. International trade today plays a much larger role in American economy today than it did just 20 years ago [10].

IV. Bane of Offshoring: Date on Employment Loss and Increased Poverty

According to estimates by Goldman Sachs, Offshoring has accounted for roughly half a million layoffs in the past three years. According to IT consulting firm Forrester the number of U.S. jobs outsourced to grow from about 400,000 in 2004 to 3.3 million by 2015. If this estimate turns out to be accurate, then offshoring could result in roughly 250,000 layoffs a year [2].

Indeed, a recent study by Ashok Deo Bardhan and Cynthia A. Kroll at the University of California, Berkeley, suggests that up to 14 million Americans now work in occupations—including financial analysts, medical technicians, paralegals, and computer and math professionals—that could reasonably be considered "at risk." [2]. This accounts for a substantial 10% of the total US employment of 137 million. When one can empathize with the workers who lose their jobs, and to the far larger number of workers who worry that they will lose theirs, this foreign outsourcing total resonates even more powerfully [2].

Now highly qualified workers in the developing world are competing with college-educated American workers. The Business Week's chief economist, Michael Mandel, worries that the "skills premium" that educated workers earned in the past may be pushed down further in the future, thus reversing a decades-long trend. Some workers could suffer erosion of their wages when their jobs are vulnerable to offshoring. Thus effects of outsourcing offshore would resonate across a broad spectrum of society.

Offshoring and outsourcing has greatly affected the inequality between Blue and White Collar occupations, as depicted in Table 1. Furthermore, the imported inputs share of total inputs produced by industry increased by 9.6 % over a 15 year period from 1987 to 2002, thereby causing increased poverty.

Manufacturing

Services

Impacts blue-collared jobs

Impacts white collar jobs

Affects individual industrial sectors and some specialized occupations within them

Affects individual occupations in many industrial sectors across the economy

Job losses offset and even reversed by increases in services employment

May lead to different composition in the economy; unclear how the labor market adjustment will work

Has led to increased inequality between blue-collar and white-collar occupations

Will lead to increased inequality within white collar occupations

Table 1: Impact of Outsourcing, ‘Fischer Center Research Reports’ – The New wave of Outsourcing [2]

e North American Industrial
Classification System (NAICS)

1987

1992

1997

2002

% Change 1987 -2002

Paper

10.5%

9.4%

13.2%

13.2%

2.7%

Printing and related products

1.1%

1.1%

3.1%

5.7%

4.6%

Chemical

8.3%

10.7%

14.8%

19.3%

11.0%

Primary Metal

16.2%

18.0%

20.6%

22.7%

6.5%

Fabricated Metal product

6.8%

5.7%

7.6%

9.5%

2.7%

Machinery

17.5%

21.8%

23.7%

27.1%

9.6%

Computer and Electronic Product

23.4%

30.1%

42.5%

45.3%

21.9%

Electrical equipment, Appliances and Components

11.6%

16.3%

22.4%

31.5%

19.9%

All Manufacturing

11.2%

12.9%

18.7%

20.8%

9.6%

Table 2: Imported inputs as share of total inputs produced by industry, 1987-2002. This table points to the fact that Outsourcing offshore causes increased poverty due to increased annual imports [29]

V. Causes of Outsourcing Offshore

The decision to outsource jobs is a complicated decision rooted in the strategic plan of a company. There are four types of Outsourcing in the case of semiconductor industry, as mentioned below:-

- Direct Outsourcing – In this type of outsourcing, a semiconductor company in US makes use of in-house low cost offshore location. Although this requires large investment, in the long run it is still able to retain jobs within the country and has the least risk. However, if US MNCs manufacture products abroad, by making use of low wages of LLCs and then sell the manufactured goods back into the U.S., this process adds to trade deficits [13]. In the long run, it might be riskier as eventually most of jobs from U.S. would be offshored to LLCs.

- Joint Venture Outsourcing – Joint venture outsourcing refers to partnership between a domestic institution and a foreign vendor which could be risky if the domestic institution does not have majority in the investment. However, it should be noted that due to rising trade deficits with China, today China withholds trillions of USD in FOReign EXchange (FOREX) reserves. Eventually, due to huge withholding of US debt, China would even be able to dominate US foreign policies [13]. Hence, Even Joint Venture Outsourcing can slowly but steadily be risky for not just US domestic economy but also for its foreign policy independence.

- Direct Third Party Outsourcing – In this type of outsourcing, jobs or services are outsourced to a third party offshore and can only control what is contractually agreed upon. This type of offshoring is riskier as U.S. can enforce its Intellectual Property (IP) laws strictly on companies doing business in U.S. However, these laws cannot be enforced in other countries, which do not fall into its jurisdiction (especially in those countries which are major creditors of U.S. Debt like China). In such a scenario, it becomes possible for the third party to misuse the IP of semiconductor companies in US in some other products which are sold domestically in that country [19]. This shows how direct third party outsourcing offshore is risky for IP security of companies offshoring their products and services.

- Indirect Third Party – In this type of outsourcing, jobs or services are outsourced to a domestic vendor, who then subcontracts the work to another vendor offshore. This is by far the riskiest type of outsourcing. Initially, the United States manufactured all defense-related products at home. However, consumer electronics are being built in China due to its low cost of labor. As technology progressed to advanced transistor technology, it required a big investment from defense contractors, who work for profit, to manufacture semiconductor wafers in the United States due to much needed proximity between “Labs and Fabs” for advancements in semiconductor manufacturing technology. Hence, several defense contractors started to use Chinese built ICs for military weapons like missiles and machine guns. Along with the state-of-the-art infrastructure, the technical know-how to make advanced technology products has also been transferred to China. So now China is flooding the U.S. defense supply chain with counterfeit ICs [19]. This has become a US national security threat, which is being kept somewhat secret from the public due to the dominating control of corporations on US government in this Corporate Capitalism era.

Some of the reasons, that companies decide to outsource, include [17]:

What leads to outsourcing offshore of semiconductor manufacturing jobs?
The answer is cost differentials: it costs manufacturers roughly $1 billion more to build wafer fabrication facility in the United States ($6.7 - $6.8 billion) than in foreign LLC locations ($5.6-$6.1 billion) [10]. Labor cost is thus a secondary issue for semiconductor manufacturers, accounting for only 10% of cost differential, and still manufacturing jobs are being outsourced offshore. When it comes to semiconductor manufacturing, the costs of operations, materials and capitals are somewhat similar in other LLC locations to those in USA. According to SIA, the manufacturing in LLCs is profitable compared to US due to much better tax benefits and more generous capital grants offered offshore by LLCs as compared to what the US government offers [10]. So this is the issue of governmental policy not rising to the occasion of matching the benefits meted out to MNCs in LLCs.

For example, Israel offers the semiconductor industry a capital grant of up to 20% and 10% tax rate with a two-year tax holiday [10]. China allows a five year tax holiday and levies only half the normal tax rate for 6 to 10 years. Ireland has 12.5 % corporate tax rate; Malaysia offers 10 year tax holiday. The 35% federal corporate tax rate in US is not competitive compared to these offshore incentives [10]. The United States semiconductor industry invests 17 cents on every dollar of sales in Research & Development (R&D), and is criticizing the failure of Congress to make federal R&D tax credit permanent [10].

In spite of only 10% manufacturing and labor cost differential between US and other countries, the supporters of Offshoring have deceptively argued that high foreign incentives is a plus for United States, since it allows American companies to focus on design, with the capital intensive production being subsidized by another country. However, the physical proximity of “labs and fabs” is even more important for Chip manufacturing complexities in nanoscale engineering [10]. Due to this reason, the related jobs such as chip layout, failure analysis, testing, assembly, etc. have also been transferred to low cost countries in Asia causing massive job losses in US.

VI. Solutions to Rejuvenating US Electronics and Semiconductor Industry

The issue of offshoring demands a careful analysis and response by policy makers. It has to be ensured that any potential benefits are equitably distributed among the firms and workers. While offshoring has substantially saved costs and also increased the corporate profits of MNCs, it cannot be assumed that these benefits would scale up for broader economy at both the micro and macro economic levels. While mainstream international economists teach that a deepening international integration usually increases national income, the observed effects on high consumer debt of middle class Americans and the country’s high national debt show otherwise. Although Offshoring may have increased incomes of companies, it has affected national income, because of the high unemployment of American workforce and their inability to pay taxes and also being on welfare. This is the short-sightedness of American multinationals that have only looked after their corporate profits and ignored the unemployment and national income loss. This is verily the downside of Crony (Corporate controlled) Capitalism, which is being cunningly and shamefully ignored. What may be good Micro-economically may not always be good Macro-economically.

Mainstream international economics is equally clear that international integration redistributes incomes than it creates. The growth in GDP may seem to be artificially portrayed as high due to offshoring, but American workers have been losers at the expense of higher corporate profits. Unemployment has many negative effects on its ‘patients’: (i) loss of their housing, lower consumerism on their part, lower education for their children, increased health effects, (ii) greater national welfare costs, and above all (iii) marked prevalent depression among the unemployed.

A good economic policy should not rest on insisting workers to sacrifice their own interests by accepting lower wages and benefits for supposedly increased national income [3]. This also throws light on the need for better metrics for measuring Macro-economic growth as compared to traditional methods of measurement in terms of the Gross Domestic Product (GDP). A good economic policy measure should also be able to take stock of the unemployed percentage and address the problem of loss in manufacturing jobs due to rapid advances in productivity due to advances in technology [18]..

Before arriving at solutions to rejuvenate the US Semiconductor industry which is on its death bed due to its offshoring, it is critical to compare the pros and cons (in terms of micro-economic factors) of offshoring of the US Semiconductor industry and associated outsourcing of US semiconductor manufacturing jobs offshore.

Micro-economic benefits of Outsourcing Offshore by proponents of offshoring.

Our analysis on proposed benefits

Semiconductor companies save on labor costs and incur less regulation.

While labor costs are low in less developed countries, the jobs offshored lead to massive job losses at home, creating a long term problem of domestic unemployment, due to short sighted thinking of short term profits

Offshoring increases MNCs productivity and increases their corporate profits for more investments into R&D.

The increase in productivity can be sustained even without offshoring. Also, it is not good economic policy to take into consideration the growth of only supply side of economics due to increased productivity, without ensuring a sustainable domestic demand for manufactured products, which causes layoffs at semiconductor company.
The US government could provide generous tax credit for R&D so that corporations do not have to offshore jobs to raise that money for R&D investments.

Offshoring gives U.S. companies access to talented individuals abroad at even lower costs.

Offshoring also causes the domestic economy to slowdown, as less job openings are available for new college graduates and existing employees have to take pay cuts which is evident from the exponentially rising productivity and stagnating wages of the US work force since 1980s.[13]

MNCs which offshore jobs claim that by hiring native born employees in other countries helps the firms in adjusting to their new market’s customs and traditions [10]..

It is true that native born employees help firms in adjusting to new market’s customs and traditions, but these firms could also gain access to new markets by retaining the high quality of products. Which consumer would not like to get the best quality of product? Additionally, by entering into new markets, rich corporations eliminate small businesses which are not able to compete with low prices offered by MNCs which also leads to monopolizing the new market. Any kind of monopoly could, over time, erode local customs and traditions in the new market.

Offshoring allows 24 hour functionality and enables work round the clock. Production can be coordinated in all global time zones [10].

This round the clock work schedule also leads to longer work weeks and affects the health of employees in US who have to co-ordinate with their peers in other time zones around the globe to meet with deadlines.

Supporters of Offshoring claim that this trend helps constrain inflation by allowing Americans to buy lower cost semiconductor products like cell-phones, tablet PCs, hybrid cars, etc. which then improves U.S. standard of living [10]..

If any country has a trade deficit (where imports are larger than exports), it leads to a fall in the country’s FOREX (FOReign EXchange) reserves (which eventually depreciates its currency). The value of a country’s currency is a deciding factor in its standard of living. Hence, a country cannot run year-over-year trade deficits if it wishes to maintain the standard of living of its citizens. FOREX reserves determine the buying power of a country’s currency.
Let us take an example of a country ‘A’ where its population has sufficient purchasing power and can buy everything produced in the nation. But there are some products that are not produced at home and have to be imported from another country ‘B’. Hence country ‘A’ has to pay money [in its currency] to buy country B’s goods. Either country ‘A’ has to balance its trade by getting country ‘B’ currency from a third country ‘C’, or go on printing its own currency. But there is a limit that country ‘B’ will accept country ‘A’‘s printed money. After that country ‘A’ will have to produce the items within the country, causing huge inflation due to the depreciated value of its currency resulting from excess money printing. [13]

MNCs claim that the U.S. government gains leverage in efforts to convince foreign governments to allow foreign firms to buy US manufactured goods and services [10].

Firstly, as a result of offshoring high paying semiconductor manufacturing jobs abroad, the manufacturing base in US has depleted. Hence, it is incorrect to claim that the goods of MNCs based in US are US manufactured goods. In fact, they are foreign manufactured goods and as a result of job losses at home, US consumers are left with no other choice but to buy cheap imported goods due to their depreciated consumer purchasing capacity.

Proponents of Offshoring claim that this trend of offshoring also strengthens the economies of developing countries and enables them to buy more US made products, provided adequate wage, safety and health standards are raised abroad.

While there is no doubt that offshoring has strengthened the economies of countries like China, but at the cost of rising consumer and National debt in US. Additionally, the depreciation in consumer purchasing capacity of Americans have forced majority of US consumers to buy imported cheap goods from China, which is also hurting domestic US economy as 70% of US economy depends on consumer spending. [13]

Proponents of offshoring claim that the unconstrained ebb and flow of capital, goods and services would be able to beneficially serve US economy as US would remain center of Innovation [10].

With outsourcing of high tech semiconductor manufacturing to LLC, the US is no longer the center of Innovation. According to Dr. Richard Haas, Chairman of the Council of Foreign Relations, China’s ownership of trillions in FOREX is a great threat to the United States, as China, with vast FOREX reserves, is in a position to influence US foreign policies through its control over the value of US currency. This is similar to the way the United States was able to dominate the foreign policies of Britain and France after World War II and forced their troop withdrawal during the Suez crisis purely because of its ownership of British and French debt. [13]

Table 3: Our Analysis of the proposed micro-economic benefits of Outsourcing Offshore by proponents of offshoring

Based on our analysis it is clear that any form of offshore outsourcing threatens the US economy. This is how ‘Globalization of Industrialization’ has been a great American deception. However, we have only analyzed the pros of the proponents who claim that outsourcing semiconductor manufacturing jobs offshore benefits overall US economy. Let us also mention the Macro-economic dangers of this practice of outsourcing jobs offshore.

- This trend of Offshoring is eroding US leadership in technological fields. As offshoring becomes more common, foreign firms and workers are becoming more sophisticated. Then, US will no longer have technological leadership; also it will pose a security risk for United States when its technical leadership is lost and there is increased dependence on foreign firms for the services they provide US.

- The domestic small businesses which have been supplying to firms that have now moved offshore would be hurt because of loss of market for their products and services [10]. This has a much larger long term impact on domestic economy, which was not well thought off for short term corporate profits.

- High technology semiconductor manufacturing jobs lost are likely to be replaced by jobs in service-providing industries which offer much lower pay and benefits which not just harm the displaced workers but also hurts domestic economic demand through reduced consumer purchasing capacity.

- Offshoring threatens upward mobility for majority of US workers who considered post secondary education as route to higher standard of living [10]. It also hurts human capital level, by reducing university enrollments in certain engineering fields where employment opportunities have been reduced by offshoring.

- A good economic system ensures prosperity for all citizens by making use of individuals’ best abilities in making a fruitful contribution to economy. The disruption of workers due to offshoring lower level jobs creates a mismatch between demands of businesses and skills of individual workers [10]. In such cases, businesses have to spend additional money in training the displaced workers.

- Due to lower wages despite increasing productivity, American workforce may be expected to place more demands on unemployment benefits and similar social programs requiring US government to run further budget deficits which adds to country’s National Debt.

- An Offshoring of hi-tech job from US also adversely affects IP security due to less stringent regulations and less strict Patent law enforcements in developing countries [10].

- Sub-contracting of offshored work also causes offshoring of liability when it comes to maintaining quality, security and integrity of products and services. Additionally, it also complicates the supply chain and makes it difficult for company’s management to exercise control and supervision over work. This threatens introducing counterfeit products into the US supply chain from independent foreign contractors [19].

- With just 10% differential in labor costs in semiconductor manufacturing, outsourcing offshore also adds costs of transportation of finished products which reduces the profit margin further for US semiconductor manufacturing companies [10]. The lost tax revenue from unemployed and the increased need to make use of the social benefits by unemployed Americans offsets the 10% differentials gained in labor costs gained through outsourcing offshore.

This raises serious questions about the benefits of outsourcing offshore to overall US economy.

- Any kind of ignorance or bad decision when it comes to taking into consideration local customs and culture, political and military stability and legal enforcements to protect IP could make this process of offshoring very expensive and it would be doomed to failure [10].

- There is a lack of control in avoiding sweat shops in offshored Developing countries. Also the demands from Wall Street for seeking higher corporate profits are likely to continue this trend of outsourcing jobs offshore. But this would very likely create a backlash not just in domestic US economy against the corporate greed, but would also create an anti-American sentiment in third world countries wherein laborers are exploited due to less stringent domestic labor laws and poor working conditions.